So your broker has just advised you that you need an Independent Solicitors Certificate. But what is it? And why do you need to pay for it?
Quite often we receive phone calls from clients saying “the bank said we need a Solicitor to sign off on our guarantee documents”. This request is generally made at the ‘twelfth hour’ and so clients are generally already a little hostile. Settlements may fall over if we can’t get the documents executed within a certain time frame. Our role in this scenario is made all the more difficult because there is often a misunderstanding from the outset that this is ‘5 minute job’. Naturally when we then provide a quote that is the equivalent of up to 3 hours work, sometimes more, clients take a step back.
The bank or lender generally sets the expectation that this is a simple signature and you will be on your way. Providing a Solicitors Certificate of Independent Legal Advice is very involved. It is a highly regulated area, and rightly so, for the protection of the consumer. The lenders rely on these Certificate’s to ensure they are not blamed if something goes wrong in the future.
What you ACTUALLY need
Some borrowers are required by their lender to have a Solicitors Certificate signed in order to shift the burden of risk of the loan over to their customer or the guarantor.
You need a qualified solicitor who can do the following:
1. Certify that the borrower/guarantor understands the documents and agrees with the terms and conditions of the loan;
2. Explain to you what the consequences of default are and what the extent of your liability actually is;
3. Ensure that you understand your repayment obligations and advise you that you should obtain financial advice if you have any concerns about meeting repayments; and
4. Ensure that any guarantor understands that if there is a default under the loan, whatever they have provided as security may be sold to recover the amount owing PLUS PLUS.
Is it REALLY that much work?
It is very difficult to ensure that as a Solicitor you have given proper advice and gained ‘informed consent’ from your client all in one meeting. Many solicitor’s refuse to sign these documents because the task at hand is not only a difficult one, often met with many time constraints but also risky business.
As the client, it is important you understand that PRIOR to your conference with your lawyer the following work has already taken place:
1. The lawyer has read through all the documents provided by your bank or lender which includes the loan contract, mortgage, guarantee and associated documents, at the very least the essential clauses if they are already familiar with the general clauses;
2. Prepared a Letter of Advice on the documents they have read;
3. Prepared the Solicitor’s Certificates ready for signing;
4. Organised a Verification of Identity to be completed. – This requires you to provide several forms of identification which then have to be certified and a checklist completed. This is compulsory;
5. Spoken with your broker, banker/lender and sometimes your accountant – if applicable;
6. Provided you with a cost agreement – if applicable; and
7. Had an initial telephone conference with you about the transaction – if applicable.
At the conference, your lawyer then provides legal advice on the potential risk of entering into the loan. We will highlight the main terms, ensure you understand how far the risk extends (usually well beyond the amount you are guaranteeing).
The conference can take up to 2 hours, so please be patient with us. We are trying to protect you as well as ourselves.
Happy buying 🙂